According to the Efficient Markets Hypothesis

question 21

Multiple Choice

According to the efficient markets hypothesis

• A)any change in Fed policy will affect security prices and returns.
• B)nothing the Fed does is capable of affecting security prices and returns.
• C)the announcement of an unexpected change in Fed policy will affect security prices and returns.
• D)securities prices are determined largely by Fed actions.

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Definitions:

Bem's Self-Perception Theory

A psychological theory suggesting that people often infer their own attitudes and feelings from observing their behavior and the context in which it occurs, rather than initially recognizing inner attributes as the cause.

State of Tension

A psychological and physical state resulting from the awareness of a discrepancy between the current state and a desired goal, leading to motivation to resolve the discrepancy.

Cognitive Consistency Theory

A theory suggesting that individuals are motivated to maintain consistency among their beliefs, attitudes, and behaviors, leading to a change in one or more of those areas when inconsistency occurs.

Fritz Heider

A psychologist known for his work on attribution theory, which explores how individuals infer the causes of others' behavior.